Here We Go: The Fed's Tightening Scheme Officially Begins This Week

Federal Reserve Chairman Ben Bernanke will begin this week to lay
out a blueprint for a credit tightening, to be followed once the
Fed decides the economy has recovered sufficiently.

The centerpiece will be a new tool Congress gave the central bank
in October 2008: an interest rate the Fed pays banks on money
they leave on reserve at the central bank. Known as "interest on
excess reserves," this rate is now 0.25%.

The Fed is still at least several months away from raising
interest rates or beginning to drain the flood of money it poured
into the financial system in 2008 and 2009. But looking ahead to
when the economy is strong enough to warrant tightening credit,
officials have been discussing for months which financial levers
to pull, when to start and how best to communicate their intent.